The Oireachtas committee that oversees the national budget has been told of the impact that any changes to Capital Acquisitions Tax (CAT) relief would have on the farming community.
Addressing the Oireachtas Committee on Budgetary Oversight yesterday (Wednesday, November 23), an Irish Farmers’ Association (IFA) delegation said that the proposed changes that were recommended by the Commission on Taxation and Welfare “have to be thoroughly understood”.
In September, it emerged the Commission on Taxation and Welfare – which was established in April 2021 to consider potential changes to the tax system – had recommended changes to the relief for agricultural assets under the CAT.
The commission published a report that month recommending that the proportion of the value of agricultural property that is written off before CAT is applied be reduced from the current rate of 90% (though the report did not recommend a specific alternative value).
The report also recommended that the threshold of property value above which CAT is applied for parent-to-child transfers be reduced from the current figure of €335,000. This is referred to as the ‘Category A’ threshold.
A cut to this threshold would see CAT applied to a greater number of farm transfers.
Although these changes were not implemented in Budget 2023, they remain on the table.
Addressing the budget committee yesterday, IFA president Tim Cullinan said that the association was disappointed not to have a representative on the Commission on Taxation and Welfare.
“Many of the proposals, for example the progressive removal of reduced VAT rates and capital taxes, will, if introduced, have a disproportionate impact on farmers,” he said.
Cullinan called for an impact assessment on the proposed changes.
“The report doesn’t fully acknowledge, in any material way, the huge reliance many farm families and SMEs [small and medium-sized enterprises] place on existing capital tax relief measures to support intergenerational renewal and sustain operations,” he said.
He added: “The IFA is totally opposed to any reduction in agricultural relief or any decline in the Category A CAT threshold. The latter proposal completely contradicts the commitment made in the Programme for Government to increase the Category A threshold to €500,000.
“Any reduction in the relief rate would have a disproportionate impact on the farming sector and would be very punitive on farm families trying to organise orderly succession plans for the future.
“It would also place a huge tax burden on the next generation at a time when they will be seeking to invest in their farm enterprise,” the IFA president commented.
The Residential Zoned Land Tax (RZLT) also came up for discussion at the committee yesterday. The IFA is opposing the inclusion of any agricultural land under its remit.
Rose Mary McDonagh, the IFA’s farm business chairperson, told the committee: “Farmers are private landowners who utilise land for food production and earn an honest living. Farmers hold land to farm, not to hoard as an investment.”
McDonagh said that many farmers are “asset rich, cash poor”.
She remarked: “Average on-farm assets in 2021 were estimated at €885,000. However, average farm income was less than €35,000, with wide variation depending on farm size and farm system.”
The IFA delegation also told the committee that it opposes any progressive increase in the rate of PRSI.